Business sales revenues and cash flow are significant factors in determining a company's financial health and viability. Sales revenue is an indicator of how much the company is selling to its customers. Cash flow is an indicator of how well the company is turning those sales into cash that it can use, for example, to pay its own bills, or to return as profits to its owners.
Merchants of all sizes require sufficient cash flow in order to meet their business obligations (e.g. rent, utilities, payroll, inventory, etc.). Cash comes into a business (cash inflows), mainly through sales of goods or services and flows out (cash outflows) to pay for costs such as raw materials, transport, labor, and power. However, many merchants across multiple industries have experienced significant losses to their bottom line due to unpredictable weather patterns. Because weather can negatively impact revenue or costs for a business, weather derivatives may be used to reduce the impact that adverse weather may create. However, it is often difficult for merchants to assess the potential impact that weather may have on their revenues, let alone obtain an appropriate hedge against adverse weather for their business. Systems and methods are desired for identifying and mitigating potentially detrimental effects of adverse weather conditions on the revenues of a company, while assisting merchants in hedging their revenue stream in the event of unpredictable weather changes that can otherwise cause profit loss.